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Additional fiscal stimulus --and not fiscal discipline-- is the way out of the crisis for both Europe and the United States, Soros said in a speech at Columbia University on Tuesday.

"Deficit reduction by a creditor country such as Germany is in direct contradiction of the lessons learnt from the Great Depression of the 1930s. It is liable to push Europe into a period of prolonged stagnation or worse," Soros said.

Germany is unlikely to change its ways, however, because its economy is doing well and because the difficulties of other countries can be blamed on structural rigidities, Soros said.

German Chancellor Angela Merkel also gained the upper hand in a recent G20 meeting where she joined forces with Canada and newly elected Conservative British Prime Minister David Cameron to put pressure on other countries to adopt austerity measures, Soros noted.

As a result, President Barack Obama yielded to the majority and agreed to cut the U.S. budget deficit by half by 2013.

"This may be the right policy but it comes at the wrong time," Soros said.

Soros doesn't think Obama should extend the tax cuts pushed

by his predecessor George W. Bush. Instead, he says, the government should direct the extra money coming from higher taxes into fiscal measures to stimulate investment, not consumption.

(Editing by Kenneth Barry)

Ford executives, who met on Monday and Tuesday with Lincoln dealers at Ford headquarters, said the No. 2 U.S. automaker plans to remake Lincoln by differentiating it more sharply from its mass-market Ford vehicles.

As part of that effort, Ford will focus on the top 130 U.S. metro areas by population, an area where it has about 500 Lincoln dealerships now, executives said.

Ford expects that about 175 dealerships in urban and suburban neighborhoods will have to be closed down. Buyouts will be offered to dealers who choose to close in meetings set to start in November, executives told reporters on Tuesday.

Ford Credit, the in-house financing arm of the automaker, will also offer credit to help the remaining dealers finance the improvements that they will have to make to stay with the Lincoln brand, U.S. sales chief Ken Czubay said.

Only about a quarter of Ford's 1,187 Lincoln dealers now have the kinds of facilities that the automaker believes it needs to compete with luxury-market competitors like Volkswagen AG's (VOWG.DE) Audi and Daimler AG's (DAIGn.DE) Mercedes, Czubay said at a briefing by Ford.

"Our volume needs to be where the luxury buyer is," Czubay said of Ford's decision to focus on urban markets in the overhaul of Lincoln.

Some 88 percent of U.S. luxury auto sales are in the top 130 biggest U.S. markets, Ford said.

Lincoln's rural dealerships will have to decide whether they will continue to represent the brand and make the required investment in new facilities, executives said.

Ford expects to have agreements in place with dealers in about a year, dealers said.

Lincoln was a top-selling luxury brand in the United States until the 1990s.

By 2009, Lincoln sales had dropped to just under 83,000 vehicles in the United States, less than half of the sales for the luxury market leader, Toyota Motor Corp's (7203.T) Lexus.

In its effort to overhaul Lincoln, Ford has also promised seven new vehicles for the brand, starting with the 2011 model-year MKX crossover, which has already been introduced.

(Reporting by Kevin Krolicki, editing by Gerald E. McCormick)

"In the last several months I've stared at our unemployment forecast and come to the conclusion that it's just not coming down nearly as quickly as it should," Chicago Federal Reserve Bank President Charles Evans told the Wall Street Journal.

"This is a far grimmer forecast than we ought to have," he said, for which reason he favors "much more accommodation than we've put in place."

Evans said he is in favor of more asset purchases but added he worries that alone would not be enough, the Journal reported.

He said the Fed should consider ways to push inflation higher in order to bring down the real cost of credit.

He said the Fed might aim to overshoot its informal 2 percent inflation target for a time to make up for lost ground, the Journal reported. New York Fed President William Dudley has also suggested the Fed consider this tool, known as price-level targeting.

"That is a potentially useful policy tool at this point and I definitely think we should study it more," Evans said.

"It seems to me if we could somehow get lower real interest rates so that the amount of excess savings that is taking place relative to investment is lowered, that would be one channel for stimulating the economy," he said.

Evans will be a voter on the Fed's policy-setting Federal Open Market Committee next year.

(Reporting by Kristina Cooke; Editing by James Dalgleish)

The jump in the Institute for Supply Management's services sector index to 53.2 in September from 51.5 in August provided some hope that economic activity picked up in the third quarter. The reading was above the 52.0 median forecast of 74 economists surveyed by Reuters.

A reading above 50 indicates expansion in the sector.

The non-manufacturing sector, which comprises mostly service sector firms, accounts for two-thirds or more of U.S. economic activity.

"The numbers are obviously better than expected," said Vassili Serebriakov, Wells Fargo currency strategist. "We are in a sweet spot where indicators no longer point to a double-dip recession. Instead, they are consistent with a slow recovery."

The index showed services firms took on more workers in September, with the employment component rising to 50.2. Though that reflected only modest hiring, it was above August's reading of 48.2, which shows the sector shed jobs that month.

New orders rose to 54.9 from 52.4.

U.S. stock prices rose after the report and the dollar pared losses against the euro. U.S. Treasuries were little changed, though, as bond investors continued to brace for more monetary easing from the Federal Reserve.

STRUGGLES REMAIN

However, the ISM report's subcomponent business activity or production index slipped to 52.8, its lowest level since January, from 54.4.

Tepid hiring and a resulting high jobless rate continue to weigh on the U.S. economy, even though the recession ended over a year ago, keeping the pace of recovery modest.

The U.S. economy grew at a 1.7 percent annual pace in the second quarter, compared to 3.7 percent between January and March. The jobless rate stood at 9.5 percent through August, and data due Friday is expected to reveal it rose to 9.7 percent in September.

Opposition Republican Party candidates, expected to regain control of the U.S. House at next month's Congressional elections, argue billions of dollars in stimulus spending have failed to jolt the economy back to life and are calling for trimming record government budget deficits.

But some economists and investors say any move toward cutting spending and trimming the fiscal deficit will plunge the country deeper in to the economic doldrums.

In an op-ed published in the London Financial Times newspaper on Tuesday, billionaire investor George Soros said there was "a strong case for further stimulus," adding "to cut government spending at a time of large-scale unemployment would be to ignore the lessons of history."

Federal Reserve officials have indicated that they may resort to pumping more money into the economy, likely via purchases of government and mortgage-backed bonds, if the economic outlook doesn't improve.